TaxTMI 
TaxTMI 
2019 (6) TMI 272
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....penalty on the Noticee of Rs. 200/- per day during which failure continues OR at the rate of two percent of such tax per month, whichever is higher. This penalty is applicable in respect of non-payment of service tax for the period upto 10/05/2008 starting from the first day of the due date till the date of actual payment of outstanding amount of service tax under Section 76 of the Finance Act, 1994read with Rule 6 of the Service Tax Rules, 1994 as the Noticee failed to pay Service Tax in accordance with the provisions of Section 68 of the Finance Act, 1994, provided that the total amount of penalty payable in terms of this section shall not exceed the service Tax payable. 4. I impose a penalty of Rs. 90,71,731/- on the Noticee under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services with malafide and premeditated intent to evade payment of service tax which has resulted in short payment of service tax. In this regard, the attention is invited to relevant provisos of Section 78 of The Finance Act, 1994 as per which if the service tax determined under section 73 and interest payable thereon under Section 75 is paid within thirty days from the ....
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....to Rs. 90,70,731/- be not demanded and recovered from them under the proviso to section 73(1) of Finance Act, 1994. Also why interest at appropriate rate on the amount determined as short/ not paid be demanded under Section 75 and penalties under Section 76, 77 & 78 be not imposed on them. Penal amount should not be recovered under Rule 7C of the Service Tax Rules, 1994. 2.6 Show Cause Notice has been adjudicated by the Commissioner as per his order referred in para 1, supra. Aggrieved by the order of Commissioner Appellants have filed this appeal. 3.1 In their appeal Appellants have assailed the impugned order stating- i. The finding of the adjudicating authority to effect that they were rendering Business Auxiliary Service as defined under Section 65(105)(zzb) read with Section 65(19) of Finance Act, 1994 is erroneous. ii. The finding of Commissioner to effect that they were providing service to Coca Cola India and the alleged promotion of sale of concentrates of CCI for which CCI was reimbursing the Appellants was not sharing of expenses and cannot be termed as taxable service for either period prior to 01.07.2012 or after that. iii. The finding ....
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.... 2008 to March 2013 was ever pointed out. iii. Wrong and contrary facts have been recorded in impugned order: a. Though they were filing the returns it has been recorded that they were not filing the returns. The order at some place records the fact of filing the return and at other place records that returns were not being filed, Inherent contradictions in the order. b. Records were admittedly provided by them but order states that they were recovered under the Panchnama proceedings. c. Tribunal Larger Bench decision in case of Nizam Sugar Factory has been overruled by the Apex Court but the order still relies upon the same to hold the demand for extended period. iv. In case of the group companies, to whom similar notice was issued, the matter has been decided by the tribunal in their favour. Reliance placed on orders in case of Narmada Drinks (P) Ltd [2017 (5) GSTL 369 (T-Del)] and Final Order No ST/A/52245/2010- CU(DB) dated 18.06.2018 read with miscellaneous order 07.04.2014. v. Brand Promotion is separate and distinct service and is not covered under the category of Business Auxiliary Service, as has been held by the Tribun....
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....of soft drink enhances the marketability of concentrate has already been settled in case of Pepsi Food Ltd [1996 (82) ELT 33 (T)], [1997 (1) ELT 544 (SC)] and [2003 (158) ELT 552 (SC)]. iv. Once it is established that advertisement of aerated water promoted marketability of concentrate the natural corollary that follows is that such activities are rightly covered in the section 65 (19)(i) prior to 01.07.2012, and post 01.07.2012 they do not fall under the negative list and hence taxable. v. Neither show cause notice nor adjudicating authority holds that the demand is made under the category of brand promotion. vi. Even if it is assumed without admitting that it tantamount to brand promoting, automatically this will not imply exclusion from service category of sale promotion of concentrate. vii. Contention of appellant that they were only promoting sale of their own goods i.e. beverages is completely misleading & not acceptable. The Bottlers Agreement makes it very clear that there is nothing under control of Appellant for beverages made by them out of concentrates supplied to them by Coca Cola since the Coca Cola retains the sole and exclusive ri....
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.... is hereby declared that for the purposes of this sub clause, "inputs" means all goods or services intended for use by the client. (v) Production or processing of good for, or on behalf of client; or (vi) Provision of services on behalf of the client; (vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi) such as billing, collection or recovery of cheques, accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision. and includes services as a commission agent, but does not include any information technology service." 5.3 The demand has been made treating that this amount has been received by the appellant for undertaking marketing promotion of the goods belonging to the client i.e. concentrate supplied by Coca Cola India. Para 7 of the Part II of the Bottler's Agreement entered between the Coca Cola Company, a corporation organized and existing under the laws of the State of Delaware, United States of America, under the heading "OBLIGATIONS OF THE BOTTLER RELATIVE TO THE MARKETING, PLANNING AND REPORTING" re....
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.... 2012 ACTIVITY TOTAL BUDGETED SHARING RATIO COKE SHARING BOTTLER SHARING Signage 1200000 1:03 300000 900000 Key Accounts Tie Ups 2000000 1:03 500000 1500000 Gift Packs 1350000 1:1 675000 675000 National UTC 7750000 1:03 1937500 5812500 Maaza Swarna Utsava QPDS 2000000 1:03 500000 1500000 Maaza Price Off Promotion 3024000 1:03 756000 2268000 Coke IMC 1000000 1:03 250000 750000 Rural Activation 1000000 1:03 250000 750000 Maaza Tetra Qpds 4000000 1:00 4000000 0 E & D Bar Activation 1000000 1:02 333333 666667 2LIT PROMO (On-Label/ Sticker) 4000000 1:03 1000000 3000000 600 MI Search Card Promo 3000000 1:03 750000 2250000 Fridge Pack Promo 1000000 1:02 333333 666667 Coke Activation in Trade 1000000 1:03 250000 750000 OYA 13860000 6006000 7854000 Modern Trade Promotions 1000000 1:01 500000 500000 Local Festive Activation 1400000 1:03 350000 1050000 IMC's Sprite & Limca 1000000 1:02 333334 666666 Red....
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....icated. The conclusion drawn by the revenue on the basis of said clause 5 and Bottlers Agreement do not flow from these and is a conclusion drawn to establish service provider and service recipient relationship. The conclusion drawn that these promote the sale of concentrate is also without any legal basis. Appellants use the concentrate supplied/ procured from Coca Cola India, for the production/ manufacture of finished products. They sell their finished products in the market as pr the plan and marketing strategy finalized by them in association with the brand owners. The objective of the sale promotion activities undertaken by them is to promote the sale of Beverages of various brands owned by Coca Cola USA and bottled by them. Any further extrapolation made by revenue for drawing the conclusion is beyond the express intent of the Bottler Agreement. 5.8 Commissioner has in para 23.2 & 23.3 of his order quoted heavily from the order of Bombay High Court in case of Coca Cola India [2009-TIOL-449-HC-MUM-ST] and concluded that Appellants were in fact providing the services to the Coca Cola India. The said para of order of Commissioner are reproduced below: "23.2 It was f....
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.... (5) && (6) && (7) Non-alcoholic or alcoholic preparations (not based on odoriferous substances) of a kind used in the manufacture of various non-alcoholic or alcoholic beverages. These preparations can be obtained by compounding vegetable extracts of heading 13.02 with lactic acid, tartaric acid, citric acid, phosphoric acid, preserving agents, foaming agents, fruit juices, etc. The preparations contain (in whole or in part) the flavouring ingredients which characterize a particular beverage. As a result, the beverage in question can usually be obtained simply by diluting the preparation with water, wine or alcohol, with or without the addition, for example, of sugar or carbon dioxide gas. Some of these products are specially prepared for domestic use; they are also widely used in industry in. order to avoid the unnecessary transport of large quantities of water, alcohol, etc. As presented, these preparations are not intended for consumption as beverages and thus can be distinguished from the beverages of Chapter 22. The heading excludes preparations of a kind used for the manufacture of beverages, based on one or more odoriferous substances (hea....
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.... therefrom are proprietary in nature and there is a direct co-relation between the demand for soft drink and the demand/manufacture of concentrate. (iv) The advertisement expenditure incurred in respect of soft drink forms part of the cost of manufacture of Concentrate ; (v) The advertisement of soft drink enhances the marketability of Concentrate. (vi) The concentrate is manufactured by the Appellants for sale exclusively to the bottling companies who, in turn manufacture the soft drinks. The bottling companies, in their turn, buy the concentrate exclusively from the Appellants. The consumption of concentrate vis-a-vis the soft drinks is in a theoretically defined proportion. As there is no sale of the concentrate by the Appellants to any consumer other than the bottling companies, the singular manner of enhancing the marketability and demand for the Appellants products, therefore, is by enhancing the market for the soft drinks, for which purpose alone, the Appellant undertakes the activities such as market research and advertising. 16. According to the Applicant, advertisement of aerated water is integrally connected with manufacture and sale o....
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....es and extends much beyond that." 23.4 In view of above, it is clear that CCI is contributing financially to the Noticee for promotional and marketing activities of their concentrates. It is also clear that the relationship of service provider and service receiver is well established and there is an explicit element of service in the instant case viz the Noticee had undertaken the sales promotion activities of concentrates of CCI for which CCI were compensating the noticee in the form of "Market Support Received" as consideration. Therefore, I find that the above sales promotion activities undertaken by the Noticee fall under category of "Business Auxiliary Service" as defined under Section 65(19)(i) of the Finance Act, 1994 and are chargeable to Service Tax under Section 66 of Finance Act, 1994 for the period prior to 01.07.2012." 5.9 There cannot be more convoluted application of the decision of the High Court and stretching the provisions in an agreement for purpose of levy of tax. If the arguments of the Commissioner were to be accepted then in that case every manufacturer/ producer/ supplier of the goods who purchases and material/ inputs is promoting the sale of h....
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....ew has been taken by the tribunal in case of similarly worded show cause notices issued to the group companies. Narmada Drinks Pvt Ltd [2017 (5) GSTL 205 (T-Del)] "9.BAS is an omnibus service covering within its fold various types of services. It has not been indicated either in the Show Cause Notice or Order-in-Original under which sub-clause the appellant's service is being charged to service tax. By process of elimination, we conclude that it is likely to be under "Promotion or marketing or sale of goods produced or service provided by the client"; we note that no investigation has been undertaken by Revenue into the reasons for which appellants have received the payments. Hence, it is not very clear why the appellant has received the said amounts from M/s. Coca Cola. However, the Show Cause Notice, in Para 6.2, has stated that the amounts have been received from the brand owners to promote and market the brands of the brand owners. 10.When we look at the clause (i) the definition of the BAS, which covers promotion or marketing or sale of goods produced or service provided, we fail to see how the promotion of the brand name can be brought under the above....
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....of ld. Counsel for the petitioner that since by amendment of the Finance Act, 1994, a new taxable service category of 'Brand Promotion' was introduced with effect from 1 July, 2010, the logical corollary and inevitable inference is that such category of service was not taxable prior to 1 July, 2010. In this connection, I am in agreement with the decision of the CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi v. Shriya Saran (supra), and the decision of the Division Bench of the Bombay High Court in the case of Indian National Shipowners' Association v. UOI (supra). Business auxiliary service and brand promotion are distinct service heads as admitted in the order of the Respondent No. 3 that the amount of Rs. 2,62,61,782/- was received by the petitioner on account of brand endorsement. Since brand endorsement was not a taxable service during the period of time for which the tax demand has been raised, such demand cannot be sustained. Such service rendered by the petitioner could not taxed under the head of Business Auxiliary Service as has been sought to be done." We find that the above decision of the High Court settles the present ....
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....declared services or negative list of services or those falling in the exclusion clause. Hence these are left out from our consideration in subsequent paragraphs. 5.14 The phrase "any activity carried out by a person for another", is very clear that the activity sought to be taxed, should be the activity carried out by one person for the another person. Thus any activity which has been undertaken by a person on his own account for himself cannot be said to be covered by the said phrase even if this activity is undertaken by the person with the financial assistance/ support of other person either partially or completely. The simplest exposition which comes to my mind for explaining the above is as follows: "A person goes for a haircut and the charges for the haircut are paid by his wife, then whether the act of payment made by wife implies that husband has rendered certain services to wife, in terms of definition of service under section 65B(44) of the Finance Act,1994?". If the answer to this question is yes that act of making the payment was to determine, whether the husband has carried out an activity for his wife, then Commissioner would be right in his approach. ....